By Ted Gregerson CCollecting money should be fun for specialty stores. Instead, it’s an absolute grind. You probably spend hours on it every day. You call the customer, but do not answer. You go to their house – there is no one there. It goes on for weeks. Once you reach them, guess what? They suddenly have a complaint about the job and want to negotiate the balance to be paid.
Years ago, I spoke to a retailer I highly respect and mentioned our long list of ever-growing debtors and the challenges of collecting money. He said to me, “Stop collecting money. Get it all at the point of sale.” I said, “That’s impossible.”
Years later, because of that conversation, our company no longer spends hours every day raising money. Our debtors are relatively non-existent, although our turnover has almost doubled since then.
You undoubtedly think, as I did at the time: “That is impossible!”
Believe it or not, it’s as simple as learning to say, “Is that a check, cash, or a credit card?” at the point of sale. If you can safely say that, most customers will pull out their payment method without hesitation and pay the full amount on the spot. What are you thinking then? You no longer have to spend hours every day in the never-ending toil of trying to raise money after installations are complete.
Some customers will ask, “Do I have to pay for everything now?” When we simply answer “Yes”, most will proceed to pay the full amount at that point.
Will you have some who refuse this? Yes. We ask those customers what their concern is to pay the full amount in advance. Inevitably, they say they’re afraid we won’t show up to do the job. For those customers, we agree that they pay half at the point of sale and the other half as soon as the installer shows up on site with the materials. Most happily agree. However, the key in that situation is to collect the balance due before the installer starts the installation.
What if a customer absolutely refuses to pay the full amount until the installation is complete? They usually say it’s because they don’t know us and therefore don’t trust us. We explain that we’ve been in business for 25 years, have a store they can walk into at any time, and we guarantee our work. We also let them know that they can use our financing program, where we don’t receive the money until the work is completed to their satisfaction. If they take it off their credit card, the credit card company will make sure they get their money back if they are not satisfied. If they still refuse, red flags immediately go up. Those are usually the customers who will eventually give us a problem, and we’d better not have the sales.
There are many advantages to working this way. Our cash flow has increased; we have fewer customer complaints; we have no more uncollected receivables; we have much more time during the day to do other things; and our sellers are happier. Our biggest fear was that we would lose business. However, our sales have almost doubled since we made this change. It’s almost as if customers feel that we’re even more credible now.
Do yourself a favor. Stop collecting money. Just put it up front.
Ted Gregerson is the owner of two retail floor covering stores in Anniston, Ala., Ted’s Abbey Carpet & Floor and Floors To Go in Anniston. He has spent his entire career in carpeting.